Caleb Franzen, a senior market analyst at Cubic Analytics, shared his observations on the US Federal Reserve’s influence on crypto and equity prices while speaking at Anthony Pompliano’s “Best Business Show” on June 20.
According to Franzen, Treasury yields and asset prices have an inverse correlation. When Fed raises interest rates, both crypto and equity prices are falling. “In that environment, we’ve seen asset prices across the board whether we’re looking at stocks or Bitcoin and crypto, or even treasuries in the bond market, everything is selling off,” the analyst said. Franzen also added that the bear trend is unlikely to end soon unless inflation is tamed.
The analyst compared the current market conditions to the bear trend of 2018 when both crypto and stocks crashed after Fed formally paused rate hikes. Similarly, in 2020 markets plunged when Federal Reserve vowed unlimited support for the country’s financial and monetary systems. “It’s a super simple and crude metric for where asset prices are going to go forward, but it’s been super accurate in this monetary wonderland that we’re in,” Franzen affirmed.
“The Fed is clearly behind the curve in this environment. If we start to see inflation data formally rollover and kind of sustain that rollover, then, I think, it could be a general foreshadowing of a reversal in the monetary policy environment,” Franzen stated.